LONDON (Reuters) - The trend of falling home insurance premiums in the UK has ended, due to heavy claims from the summer floods, according to the AA's latest premium index, released yesterday.

The average quoted premium for home buildings insurance rose by three percent over the past quarter, the largest single rise since the index was launched in 1994, the AA said. Home contents premiums also rose by more than two percent during the period.

The cost of claims from the worst floods to hit the country in 60 years has forced insurers to push up premiums, said the AA, whose index is widely viewed as the barometer for the UK insurance market.

The heavy claims bring to an end months of aggressive price cutting as firms tussled for market share. In the previous quarter the average premium for home buildings insurance was down nearly 2 percent, according to the AA.

Insurers face a bill of over £3 billion ($6.11 billion) from more than 130,000 claims that resulted from the torrential rainfall that hit central, northern and western England in June and July.

But predictions of price hikes of as much as 15 percent have proved unfounded, the AA said. Although premiums are likely to continue to rise, continued competitive pressure will keep a lid on the rises, it said.

Motor premiums continued the upward trend that began at the end of 2006, the AA said. The average quoted premium for an annual comprehensive car insurance policy in the last quarter rose by more than one percent, while the cost of a third party, fire and theft policy rose more than 3.5 percent.

Analysts and actuaries argue the cost of motor premiums must rise further, as premiums have not kept pace with the increasing cost of claims.

Insurers have opted to keep prices low and compete for market share by dipping into money from reserves that are no longer needed to pay claims, but as these funds are depleted then insurers will need to charge significantly more in future.

The cost of bodily injury claims paid by UK motor insurers have risen by 9.5 percent a year between 1996 and 2006, according to a survey by the Association of British Insurers and the International Underwriting Association, also released on Monday.

The cost of the largest bodily injury claims of over 80,000 pounds is rising fastest, at 10 percent a year, while the industry is also faced with a handful of cases of more than 15 million pounds, due to serious multi-car pile-ups, according to the study.